In Oregon, they are considering increasing the excise tax on beer brewers from $2.60/barrel to $49.61/barrel. If my math is correct, that is a whopping 1,808% increase! According to Kurt Widmer from Widmer Brothers Brewery in Portland, Oregon, that could yield a $2 to $4 increase per six pack. I know that both sides of an argument like this are likely to spin things in their favor, but I don’t care what your position, an 1,800% tax increase seems absurd. Do they have any idea the damage and long-term impact of doing that?

The Oregon brewing industry has thrived over the past 20 years and risen to the top of the American craft brewing scene. (I won’t argue which state is best, but no one can dispute Oregon is in the discussion.) Much of the reason Oregon breweries have flourished is because of low taxes and brewery-friendly laws. Oregon hasn’t increased the excise tax since the 1970s. But, as is usually the case, the government sees something doing well and they want their share.

I’m not sure where most of our government officials went to school and if they required an economics class as part of their degree, but it certainly doesn’t seem like it ($850 billion “bail-outs” aside). If they raise the taxes on beer, the price of beer will go up. What happens to the supply and demand curve when price is shifted up? Demand goes down.

Beer is not gasoline or water. People will buy less if the price goes up. The term is called “price elasticity of demand.” I rarely buy Rogue beer anymore, despite the fact that it is one of my favorite breweries, because it costs $12.99/six pack here. I would never pay $15 or $16 for a six pack, at least not in 2009 dollars, unless it was my birthday.

If beer sales go down enough or it causes a lot of breweries to go out of business because they can’t compete at the new price points, the state may actually generate fewer tax dollars, despite the higher tax rate. For once, could we possibly try thinking long-term instead of grabbing the dollar right in front of our face?

Now I’ve gone and gotten myself all worked up. I need a beer… (And yes, I have an MBA, for what it’s worth.)